Basic Concepts of Share Capital

What is the maximum number of members in a private company?

• 50

• 100

• 200

• No limit

Answer explanation

In a private company, the maximum number of members is capped at 200. This limit is set to ensure manageable governance and compliance, distinguishing private companies from public ones, which have no such limit.

Share capital which is actually issued by a company out of its authorized capital is called:

• Issued capital

• Subscribed capital

• Called up capital

• Paid-up capital

Answer explanation

Issued capital refers to the portion of authorized capital that a company has actually issued to shareholders. It represents the shares that have been made available for purchase, distinguishing it from other types of capital.

The maximum limit of capital that a company can raise during its lifetime is called:

• Authorized capital

• Issued capital

• Subscribed capital

• Paid-up capital

Answer explanation

Authorized capital is the maximum amount of capital a company can raise during its lifetime, as specified in its charter. It represents the limit set by the company for issuing shares.

The part of authorized capital which is offered to the public for subscription is known as:

• Issued capital

• Reserved capital

• Subscribed capital

• Called-up capital

Answer explanation

Issued capital refers to the portion of authorized capital that a company offers to the public for subscription. It represents the shares that have been issued to shareholders, making it the correct choice.

The portion of the called-up capital which is actually paid by the shareholders is called:

• Authorized capital

• Called-up capital

• Uncalled capital

• Paid-up capital

Answer explanation

Paid-up capital refers to the portion of called-up capital that shareholders have actually paid. It represents the funds that the company has received from shareholders in exchange for shares.

The portion of share capital which can be called up only in the event of winding up is:

• Reserve capital

• Uncalled capital

• Called-up capital

• Authorized capital

Answer explanation

Reserve capital is the portion of share capital that can only be called up during winding up, distinguishing it from other types of capital like uncalled or called-up capital.

The document that contains the rules and regulations for the internal management of a company is called:

• Memorandum of Association

• Articles of Association

• Prospectus

• Certificate of Incorporation

Answer explanation

The Articles of Association outline the rules and regulations for a company's internal management, detailing the rights and responsibilities of its members and directors, making it the correct choice.

The minimum number of members required to form a public company is:

• 2

• 3

• 7

• 10

Answer explanation

A public company requires a minimum of 7 members to be formed, as per corporate regulations. Therefore, the correct answer is 7.

Equity shares are also known as:

• Preference shares

• Ordinary shares

• Deferred shares

• Cumulative shares

Answer explanation

Equity shares are commonly referred to as ordinary shares. They represent ownership in a company and entitle shareholders to vote and receive dividends, distinguishing them from preference shares and other types.

Which of the following is NOT a characteristic of equity shares?

• Voting rights

• Fluctuating rate of dividend

• Fixed rate of dividend

• No preferential rights

Answer explanation

Equity shares do not have a fixed rate of dividend; instead, dividends fluctuate based on company performance. Therefore, 'Fixed rate of dividend' is NOT a characteristic of equity shares.